551 User not local when sending email in Outlook using Ubuntu 11.04 ISPConfig 3

I have set up a cloud server running Ubuntu Server 11.04 and ISP Config 3 installed. Everything works fine except when I want to send out an email with a email client such as Outlook I get the following error: '551 User not local'.

I enabled "Server requires authentication" in the client. The email is working fine when using webmail (Squirrelmail), both sending and receiving. Also I can receive emails in Outlook, but not send. Does anyone know what is the problem and how to resolve this?

Today i found out something very remarkable, I try to set up my Outlook on my notebook while I am in Hongkong. Everything works fine now, I can send and receive emails without any errors!

For your information, I am based in Shenzhen China and want to set up the email account on my desktop PC over there. Now I have remote access to this PC in China. So now I try to do the same Outlook setup on my desktop PC, but still get the same error 'User not local'... Is my cloud server blocking SMTP connections from China??

Ok back in China I found out that the email I had set up in my laptop with Outlook still works! So its not about China internet indeed.... I can receive & send on my laptop even in China, but still not on my desktop. In the server log it shows 'lost connection after RCPT from unknown' and in Outlook it shows 'user not local'

A friend of mine in UK has also set up an email account which is on the same server. He is also not able to send emails in Outlook. On the server log it shows 'Relay access denied'

Sending emails in Outlook seems to be everywhere ok now! Only when I test the email settings by 'Test Account settings' I get an error message 'user not local' but if I ignore this and send messages in Outlook itself then there is no problem at all and can send and receive....